Bridge to bond facilities
Produced in partnership with Cleary Gottlieb and Ian Chin of Morrison & Foerster
Bridge to bond facilities

The following Banking & Finance guidance note Produced in partnership with Cleary Gottlieb and Ian Chin of Morrison & Foerster provides comprehensive and up to date legal information covering:

  • Bridge to bond facilities
  • What are they?
  • Typical deal structure
  • Governing law
  • Certainty of bridge commitment
  • Key financing documents
  • General practical considerations when negotiating bridge commitments

What are they?

A bridge to bond facility is a type of acquisition financing where the buyer requires the certainty of a fully committed financing package, but which is intended to be replaced in the future with a mid- to long-term financing in the form of high yield bonds.

In markets where acquisitions typically do not have a financing condition, a bridge financing package (which is available to be drawn if necessary) is often a key component to a successful bid.

This Practice Note focuses on bridge to high yield bond financing. However, investment-grade borrowers also commonly use bridge facilities for acquisitions. Bridge commitments for investment-grade borrowers differ in many ways, including: lower pricing, much less restrictive covenants (the terms often follow the borrower’s existing credit facilities) and the securities demand mechanic may not be included (or if included, it may only be triggered by ratings downgrade).

For more information on high yield bond financing, see Practice Note: An introduction to high yield bonds.

This Practice Note assumes a certain knowledge of acquisition and leveraged finance structures, terminology and jargon. For introductory information, see Practice Note: Acquisition finance—introductory guide. The Glossary of acquisition finance terms and jargon may also be useful.

Note Article: Bridge to high yield bond: mind the gap (2017) 4 JIBFL 225 which also provides information on bridge to bond facilities.